Final answer:
Sweden has the highest VAT rate in the European Union, which may be attributed to its robust welfare system and the need for higher tax revenue to support public spending.
Step-by-step explanation:
The country in the European Union with the highest rates of value added tax (VAT) is Sweden. Value Added Tax, or VAT, is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.
While countries like Germany, France, and Italy also have significant VAT rates, Sweden stands out among them. Germany has a strong economy with the largest GDP in Europe and is known for its high-tech industries, whereas France and Italy have lower trade to GDP ratios compared to Belgium or Sweden. The high VAT rate in Sweden could be in part due to its strong welfare state, which requires higher public spending, thus the need for more tax revenue.